A general warranty deed will guarantee clear title when you purchase a home, but it may not be enough to protect you from every possible scenario.
Title Guarantee: General Warranty Deed
A general warranty deed is a guarantee that the seller holds clear title to a specific piece of real estate, and that they have the right to sell the property to you. This type of deed is used in most real estate deed transfers since it provides the greatest protection of any deed. Lenders prefer this type of deed because it is most likely to show the true owner of the property on which the lender is providing funding.
This type of deed:
- Is often known as a Grant Deed.
- Declares that the seller is the owner of the property and has the right to sell the property.
- Guarantees title from the origin of the property, not just to the time frame during which the seller owned the property.
- States that there are no hidden liens or debts against the property.
Added Protection
A general deed provides greater title protection than a special warranty deed because it has the seller's guarantee of clear title. Be aware, however, that neither deed can help you in a future title problem if:
- You can't locate the seller
- The seller is dead
- The seller is unable to follow through on the promises made in the deed
Title Search
For added protection you should consider having a title search completed during the closing process to determine any title problems before you purchase a piece of property, even if you are given a general warranty deed.A title search will include a search of public records to determine all previous owners of the property and verify that the ownership was correctly transferred to each subsequent owner. The title searcher will also be looking for other documents that might affect the title or use of the property such as:
- Easements
- Covenants, Conditions & Restrictions (Homeowner association rules)
- Marriage records
- Death certificates
- Tax sales of property
Title Insurance
Title searches are only as good as the records reviewed and the accuracy of the person completing the title search. Errors can be made.For protection against errors, you can purchase a title insurance policy. This type of insurance covers the cost to investigate and settle many types of losses that could occur if title problems are uncovered in the future.
There are three basic types of title insurance:
- Basic Owner's Coverage that covers:
-
- Clear title
- Incorrect information and signatures
- Defective recording of titles
- Encumbrances
- Legal judgments
- Restrictive covenants
- Fraud and forgery
- Lender's Coverage that covers:
-
- Unrecorded assess rights and easements
- Mechanic's liens
- Unrecorded liens
- Defects
- Unrecorded documents
- Extended Owner's Coverage that covers:
- Living trusts
- In accurate subdivision maps
- Covenant violations
- Damage caused by mining
- Violations in or missing building permits
- Forgeries
- Encroachments
The buyer usually pays for the lender's coverage. Payment for the Basic or Extended Owner's Coverage could be made by the new owner, or it could be split between the buyer and the seller.
Title insurance is offered in all states except Iowa, which instead has a Title Guaranty Program. This state-run program costs the consumer about $400 for $500,000 in title coverage versus title insurance in other states that would cost about $2,500 for the same amount of coverage.
